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Intraday Calls

(Last updated on 31st Dec at 03:16 pm)

Guidelines for Intraday Calls

What Is Intraday Trading?

Intraday Trading is the act of buying and selling a Financial Instrument (Shares / Stock Futures / Index Futures / Stock Options / Index Options), within the same day, or even multiple times over the course of a day, taking advantage of price moves throughout the day.

What is Square off in Trading?

The investors indulging in day trading/intraday trading use square off to close / reverse the position and book profit / loss.

Example of Intra Day Trading:

Suppose a trader buys 100 shares of Reliance Industries on 8th August 2018 at Rs. 1,217 at 9.45 am. The same trader then sells these 100 shares on the same day, say at 2.45 pm at Rs. 1,232. Here, the trader squares off his position in the same trading session and books profits of Rs. 15 per share. As he had 100 shares, he has booked total profits of Rs. 1,500/- This is called as intraday trading.

Advantages of Intraday Trading:

  1. Flexibility to trade even with a small capital base
  2. More exposure through higher churn via the intraday trading
  3. Low brokerage, as some brokers offer as low as one paise brokerage for intra day trades
  4. Ability to trade according to the current market trend
  5. Liquidity in account and hence sudden market collapse won’t hurt portfolio

Disadvantages of Intraday Trading

Disadvantages of Intraday Trading are far more and can cause great damage to portfolio. Let us illustrate:

  • Long Term Wealth Cannot Be Generated By Short Term Trading: People who buy shares for Intra Day (basically for few hours) are more dependent on the mood of the market and rather than fundamentals. Investors who identify handful of strong investment ideas in 12 months, tend to make more money (return) than people who find new stock to bet on every hour.
  • Quality v/s Quantity: Intraday Traders is always focussed on Quantity of trades (making more number of small profitable trades) while LT Investor is focussed on Quality. This reminds us of very old Hindi idiom – “100 sunar ki, 1 lohar ki” (which means one powerful blow is comparable to a hundred smaller blow)
  • Magic Of Compounding: We were taught in primary school a Compound Interest Formulae: P(1+R)^N. With this formula, if a person had invested just One rupee at the time Babur invaded India in the year 1526 A.D., then on nominal rate of return of 3% per annum, that one rupee would be now worth over Rs. 18 lakhs, and at 5% per annum return, it would be over Rs. 2,300 crores. That’s the Magic Of Compounding which intraday trader can never enjoy and experience.
  • History & Living Legends: Be it Peter Lynch or Jesse Livermore or Warrant Buffet or any other successful investor, who has created “wealth”, has always advocated principal of Long Term Investing. Remember, Creating Wealth is different from Making money: In a stock market, Majority of Wealth is generated by “Waiting” and not by “Buying & Selling”.

Still, for those who would like to allocate some % of portfolio for Intra Day Trading, we have collated some basic tips and strategies for Day Trading:

Basic Tips & Strategies For Intra Day Trading:

Tip No. 1: Be Patient In Booking Profits: As long as the stock is acting right and market is acting right, do not be in a hurry to take profits and try to ride entire day’s movement, as sometimes most of the moves come in last hour of the trading session. Let your profits run!

Tip No. 2: Be Agile In Cutting Losses: If the stock is not acting as anticipated, immediately determine that time is not yet ripe and exit with stop loss principle, depending on your risk – reward that you, as an intraday trader are willing to take.

Tip No. 3: Never Become Involuntary Investor: The essence of intraday trading turning paper profits into real profits, with no open positions to worry about at the end of the day, especially in case of F&O. If stock has not acted as anticipated, do not let it turn into investment. Speculative Trades should never be allowed to turn into Involuntary Investments, just in hopes of recovering cost!

Tip No. 4: Few Is Better Than Many: Avoid spreading your interest in too many stocks. Commonsense dictates that it is far easier to track a Few Stocks versus Many stocks at a time

Tip No. 5: Sister Trades: When you clearly see a move coming in across all the stocks of one particular sector, Act Upon It!

Tip No.6: Classic Rule of Peanuts & Watermelons: Make sure your profits in the size of Watermelons and Losses are in the size of peanuts. If you are doing opposite, probably it’s time to take a break for few days and evaluate your mistakes

Tip No. 7: The Feeling on Uneasiness: Although this point focuses on emotional intelligence rather than Technical and Fundamental triggers, it is highly beneficial. Many a times, one benefits a lot by paying attention to a great degree of uneasiness in a trade, and squaring it off gives a big relief. Do it.

Tip No. 8: Game of Snakes & Ladders: Stock market is like a game of Snakes & Ladders. While everyone is focussed on catching the ladder, it is as important to avoid Snakes as well.

Tip No. 9: Be Realistic About Profits: A strategy doesn't need to win all the time to be profitable. Many traders only win 50% to 60% of their trades. But they make more on winners, than lose on losers. It is important to specify or limit the risk on each single trade, by clearly defining the entry and exit methods adopted.

Tip No. 10: Learnings From Mistakes: Keep notes and reasoning of trades. Your every trade must do either of two things for you a) Increase your confidence in your rules & convictions or b) Teach you a new lesson

Tip No. 11: Avoid Margin Money As Much As Possible: Buying on margin is borrowing money from a broker to purchase stock.  For a random example, with Rs. 1 lakh in your account, your broker might allow you to buy securities upto say Rs. 5 lakh. This is Wrong & Dangerous. Use your own capital only for all types of trading, thereby keeping your family and your health safe. Remember, A Broker – Client Relationship is such that if client prospers, broker suffers and if client suffers, broker prospers!

Tip No. 12: Take Breaks, Before It Breaks You, as Health is biggest Wealth: One simply cannot make profits by trading every single day. It is just not on the cards and cannot be done. It is important to allow your mind some cooling periods and weeks in between.

Who Should and Should Not Do Intra Day Trading?

Full Time Engagement: An efficient Intra Day Trading requires continuous monitoring of trends, news developments and of course open positions. For someone engaged full time in a profession / business / employment, a ST / MT / LT Investment offers much better option. On the other hand, If you are full time in markets, with dedication and seriousness (not placing just random bets), Intra Day offers good opportunities to make reasonable profits.

Personal Goals & Return Expectations: For participants requiring certain some of money after certain period of time, with well defined expected rate of return, initial capital and holding period, magic of compounding will work well for them over LT. For others who get satisfaction from daily gains and do want to continuously churn their portfolios, Intraday Trading is a better option.

Capital Constraint: Generally, Participants with ample capital can participate in many number of stocks and yet have free liquidity in account, hence they generally do not restrict themselves to intraday trading. On other hand, participants with limited capital and many profitable ideas on hand, can benefit more by churning their trades in favour of stocks showing right momentum and thus avoid holding period time. For them, Intra Day trading is an equally good option.

However, we strongly advise delivery based investment strategies (be it over short, medium or long term) for overall gains – both monetary and non-monetary.

Rules to Follow when acting on our calls

  1. This is a Trading Section. Do not put more than 5% of your equity funds in all calls put together.
  2. Members who are not familiar with F&O or are having no knowledge of F&O, MUST NOT TRADE on these calls.
  3. SL is advised on closing basis (after 3 pm) & target on real time basis. A cautious trader can put SL on real time.
  4. Rates given are cash rates and not of Futures.
  5. Buy / Sell closer to the given levels only and avoid buying / selling closer to the target.
  6. Trading in F&O is only advised to Members having Growth profile. Since Intraday by its nature is F&O, intraday is not recommended to Members with Balanced or Conservative profiles.
  7. We give 1 call in this section daily.
  8. Avoid review of calls till 3 pm by asking queries, as we give exit calls for all calls in this section before market closes.
  9. Disclosure: Our interest in the call is given in the Disclosure column. 'Have interest' implies we have holding in the stock, while 'No interest' implies we do not have any holding in the stock.
  10. Rationale for advise: Calls in this section has been given based on fundamentals, technicals, recent news flows and trends, as observed in the market and in the stock.

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